Despite the COVID-19 outbreak and the pandemic’s economic fallout, total investments into the insurtech sector through the first six months of 2020 appear to be on pace to become, at least, the second highest year of investments on record.
After sharp declines in March and April, May and June yielded two of the highest funded months on record in the insurtech sector, according to Deloitte’s third annual report on insurtech investments. At the end of the third quarter, investments were at nearly $3.5 billion. Total 2019 insurtech investments reached $5.6 billion.
Where are people placing their bets in the world of insurtech funding and development? Sam Friedman, Insurance Research leader at Deloitte’s Center for Financial Services, says investors are increasingly seeking out top performers in the insurtech space, or those with provable results rather than startups. This trend has been accentuated in greater demand during the pandemic, he said. Roughly, 55% of insuretech funding fell into the hands of the top 10 insurtechs through third quarter 2020.
The number of new insurtechs continues to dwindle in a saturated market, according to the report. New insurtech launches are fewer and farther between since 2017.
Funding for insurtechs in operations has soared for the second straight year, while customer acquisition is already the second highest in the first half alone, but personal lines investment dwindled after major spurts.
Operational efficiencies are driving insurtech providers’ focus, Friedman noted. “Insurtechs dealing with internal operational issues led the way big time,” he said. “That is a continuation of what we saw in 2019. This makes sense as insurers are seeking greater operational efficiency, expense management and cost control being front and center, these are likely to remain high priorities especially given the possibility of top line growth challenges during the economic fallout of the pandemic and with low interest rates hindering investment portfolio returns.”
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